Monday, October 31, 2011

"Government bureaucracy and bungling at its best! If you ever want a program to fail just have the Fed run it! Because of the way HAMP was established it was destined to fail right from the start. They're "surprised" that more home owners aren't being helped? Beside the fact that the servicers/lenders are just not interested in helping anyone but themselves (which no one ever acknowledges) the Fed made the punishment for noncompliance almost nonexistent. In addition, how successful did the Feds really expect HAMP to be when the underwriting requirements for HAMP are more stringent than the original requirements?"- John Brancato, Loss Mitigation, Robert E. Brown, P.C.

Federally funded mortgage relief programs continue to struggle to reach homeowners, according to the Special Inspector General of the Troubled Asset Relief Program (SIGTARP).

A new report from the watchdog agency, only $2.5 billion – or 5.4 percent – of the $45.6 billion in TARP funds earmarked for housing support programs has been spent.

SIGTARP says participation in the signature Home Affordable Modification Program (HAMP), in particular, has been “disappointing.” The oversight group estimates that should the pace of modifications continue at its current pace, as many as 600,000 homeowners who are eligible for the program will not receive a permanent modification before HAMP expires next fall.

Treasury recently published data showing that there are now 992,968 homeowners eligible for HAMP. The number of new permanent mortgage modifications each month has hovered between 25,000 and 30,000.

“While this represents real help for these homeowners, many additional homeowners could receive that same help,” SIGTARP said in its report.

The special inspector general attributes HAMP’s sub-par numbers “in large part to poor servicer performance.”

The agency says through its hotline and anecdotally, its staff continues to hear about homeowner frustration with the performance of mortgage servicers related to HAMP.

The watchdog group says Treasury could reduce the likelihood that homeowners are misinformed or confused by requiring servicers to notify borrowers in writing of any change related to their participation status or application terms. SIGTARP says this written communication could be as simple as email, and notes that oral notification is open to abuse with compliance difficult to assess.

The agency also says there have been a number of serious homeowner complaints that many trial modifications last beyond the intended three months, that many trial modifications fail to ever convert to permanent status, and that homeowners have trouble getting timely responses when they escalate complaints.

To address these concerns, SIGTARP says it has made new recommendations to Treasury to improve servicer performance, including that Treasury set benchmarks on what it deems to be acceptable performance for conversion rates from trial to permanent modifications, length of trial modifications, and timelines for resolving escalated cases.

SIGTARP recommended that Treasury measure all servicers against those benchmarks. When any servicer — not just the top 10 that Treasury evaluates each quarter — fails to perform at acceptable levels, SIGTARP recommended that Treasury “vigorously enforce its rights,” including using all available financial remedies to force servicer compliance through withholding, permanently reducing, or clawing back incentive payments.

According to SIGTARP, Treasury has determined not to take any further action to implement its suggestions, stating that it considered the recommendations closed.

According to Treasury, it has “succeeded in improving servicer performance” with non-financial remedies and temporarily withholding incentives from two servicers. Treasury stated that it will exercise its financial remedies “when necessary,” but SIGTARP says given the number of homeowner complaints, if there are benchmarks in this area, Treasury is not adequately enforcing them against the 112 active servicers.

For example, if Treasury’s benchmark for acceptable lengths of trial modifications is three to four months, SIGTARP says it is not aware of any repercussion for servicers who exceed that time.

“With less than 1 million struggling borrowers remaining eligible, and a window quickly closing on the end of the program, Treasury must double its efforts to ensure that servicers comply with program requirements,” SIGTARP said in its report.

The federal agency stressed that compliance with the program is not voluntary, adding that if Treasury does not take action to change the status quo … “Treasury is giving up a chance at meaningful change and sadly, it is struggling homeowners who have the most to lose.”

Steven J. Baum Halloween Party Photos Show Appalling Lack of Respect Toward the Homeowners they Defraud

As I always try to censor/warn of foul language in my posts, this one has gone too far to hold that back.

But, I guess, profane times deserve profane words…

Read the write up below and study the pictures. Look at them hard. This is what they think of you “deadbeats.”

This is an OUTRAGE!

Now, what are you going to do about it?

Prize for the person who identifies the girls in the pictures…

~

What the Costumes Reveal

On Friday, the law firm of Steven J. Baum threw a Halloween party. The firm, which is located near Buffalo, is what is commonly referred to as a “foreclosure mill” firm, meaning it represents banks and mortgage servicers as they attempt to foreclose on homeowners and evict them from their homes. Steven J. Baum is, in fact, the largest such firm in New York; it represents virtually all the giant mortgage lenders, including Citigroup, JPMorgan Chase, Bank of America and Wells Fargo.

he party is the firm’s big annual bash. Employees wear Halloween costumes to the office, where they party until around noon, and then return to work, still in costume. I can’t tell you how people dressed for this year’s party, but I can tell you about last year’s.

That’s because a former employee of Steven J. Baum recently sent me snapshots of last year’s party. In an e-mail, she said that she wanted me to see them because they showed an appalling lack of compassion toward the homeowners — invariably poor and down on their luck — that the Baum firm had brought foreclosure proceedings against.

When we spoke later, she added that the snapshots are an accurate representation of the firm’s mind-set. “There is this really cavalier attitude,” she said. “It doesn’t matter that people are going to lose their homes.” Nor does the firm try to help people get mortgage modifications; the pressure, always, is to foreclose. I told her I wanted to post the photos on The Times’s Web site so that readers could see them. She agreed, but asked to remain anonymous because she said she fears retaliation.

Let me describe a few of the photos. In one, two Baum employees are dressed like homeless people. One is holding a bottle of liquor. The other has a sign around her neck that reads: “3rd party squatter. I lost my home and I was never served.” My source said that “I was never served” is meant to mock “the typical excuse” of the homeowner trying to evade a foreclosure proceeding.

A second picture shows a coffin with a picture of a woman whose eyes have been cut out. A sign on the coffin reads: “Rest in Peace. Crazy Susie.” The reference is to Susan Chana Lask, a lawyer who had filed a class-action suit against Steven J. Baum — and had posted a YouTube video denouncing the firm’s foreclosure practices. “She was a thorn in their side,” said my source.

A third photograph shows a corner of Baum’s office decorated to look like a row of foreclosed homes. Another shows a sign that reads, “Baum Estates” — needless to say, it’s also full of foreclosed houses. Most of the other pictures show either mock homeless camps or mock foreclosure signs — or both. My source told me that not every Baum department used the party to make fun of the troubled homeowners they made their living suing. But some clearly did. The adjective she’d used when she sent them to me — “appalling” — struck me as exactly right.

These pictures are hardly the first piece of evidence that the Baum firm treats homeowners shabbily — or that it uses dubious legal practices to do so. It is under investigation by the New York attorney general, Eric Schneiderman. It recently agreed to pay $2 million to resolve an investigation by the Department of Justice into whether the firm had “filed misleading pleadings, affidavits, and mortgage assignments in the state and federal courts in New York.” (In the press release announcing the settlement, Baum acknowledged only that “it occasionally made inadvertent errors.”)

MFY Legal Services, which defends homeowners, and Harwood Feffer, a large class-action firm, have filed a class-action suit claiming that Steven J. Baum has consistently failed to file certain papers that are necessary to allow for a state-mandated settlement conference that can lead to a modification. Judge Arthur Schack of the State Supreme Court in Brooklyn once described Baum’s foreclosure filings as “operating in a parallel mortgage universe, unrelated to the real universe.” (My source told me that one Baum employee dressed up as Judge Schack at a previous Halloween party.)

I saw the firm operate up close when I wrote several columns about Lilla Roberts, a 73-year-old homeowner who had spent three years in foreclosure hell. Although she had a steady income and was a good candidate for a modification, the Baum firm treated her mercilessly.

When I called a press spokesman for Steven J. Baum to ask about the photographs, he sent me a statement a few hours later. “It has been suggested that some employees dress in … attire that mocks or attempts to belittle the plight of those who have lost their homes,” the statement read. “Nothing could be further from the truth.” It described this column as “another attempt by The New York Times to attack our firm and our work.”

I encourage you to look at the photographs with this column on the Web. Then judge for yourself the veracity of Steven J. Baum’s denial.

Article reproduced in full for educational purposes and to show the complete disregard for homeOWNERS in NY and across the country.

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While the exact terms remain under wraps, some aspects of this agreement — between banks on one side, and the federal government and a raft of state attorneys general on the other — are coming into focus.

Things could change, of course, and the deal could go by the boards. But here’s the state of play, according to people who have been briefed on the negotiations but were not authorized to discuss them publicly.

Cutting to the chase: if you thought this was the deal that would hold banks accountable for filing phony documents in courts, foreclosing without showing they had the legal right to do so and generally running roughshod over anyone who opposed them, you are likely to be disappointed.

This may not qualify as a shock. Accountability has been mostly A.W.O.L. in the aftermath of the 2008 financial crisis. A handful of state attorneys general became so troubled by the direction this deal was taking that they dropped out of the talks. Officials from Delaware, New York, Massachusetts and Nevada feared that the settlement would preclude further investigations, and would wind up being a gift to the banks.

It looks as if they were right to worry. As things stand, the settlement, said to total about $25 billion, would cost banks very little in actual cash — $3.5 billion to $5 billion. A dozen or so financial companies would contribute that money.

The rest — an estimated $20 billion — would consist of credits to banks that agree to reduce a predetermined dollar amount of principal owed on mortgages that they own or service for private investors. How many credits would accrue to a bank is unclear, but the amount would be based on a formula agreed to by the negotiators. A bank that writes down a second lien, for example, would receive a different amount from one that writes down a first lien.

Sure, $5 billion in cash isn’t nada. But government officials have held out this deal as the penalty for years of what they saw as unlawful foreclosure practices. A few billion spread among a dozen or so institutions wouldn’t seem a heavy burden, especially when considering the harm that was done.

The banks contend that they have seen no evidence that they evicted homeowners who were paying their mortgages. Then again, state and federal officials conducted few, if any, in-depth investigations before sitting down to cut a deal.

Shaun Donovan, secretary of Housing and Urban Development, said the settlement, which is still being worked out, would hold banks accountable. “We continue to make progress toward the key goals of the settlement, which are to establish strong protections for homeowners in the way their loans are serviced across every type of loan and to ensure real relief for homeowners, including the most substantial principal writedown that has occurred throughout this crisis.”

Still, a mountain of troubled mortgages would not be covered by this deal. Borrowers with loans held by Fannie Mae and Freddie Mac would be excluded, for example. Only loans that the banks hold on their books or that they service for investors would be involved.

One of the oddest terms is that the banks would give $1,500 to any borrower who lost his or her home to foreclosure since September 2008. For people whose foreclosures were done properly, this would be a windfall. For those wrongfully evicted, it would be pathetic. Roughly $1.5 billion in cash is expected to go into this pot.

The rest of the cash that would be paid by the banks is expected to be split this way: the federal government would get about $750 million, state bank regulators about $90 million. Participating states would share about $2.7 billion. That money is expected to finance legal aid programs, housing counselors and other borrower support. If 45 states participated, that would work out to about $60 million apiece.

OBVIOUSLY, the loan modifications would make up a majority of the deal. And this is where real questions arise. For example, how can we be sure this plan won’t reward banks for modifications that they would have agreed to or should already have done absent the deal?

Perhaps most important, will the banks change the terms of loans enough to ensure that borrowers can actually meet their obligations over time? Or will these modifications default again, as is often the case? If so, the banks will have received a lucrative credit, even though borrowers fall back into trouble.

Such concerns are justified because past settlements promising big help to borrowers have failed to live up to their hype. An example is the 2008 settlement with Countrywide Financial that was struck by Illinois and California. Characterized as providing $8.7 billion in relief to troubled borrowers, it turned out to generate nowhere near that benefit.

The deal being discussed now may also release the big banks that are members of MERS, the electronic mortgage registry, from the threat of some future legal liability for actions involving that organization. MERS, which wreaked havoc with land records across the country, was sued last week by Beau Biden, Delaware’s attorney general, on accusations of deceptive trade practices.

The MERS registry was also subpoenaed last week by Eric Schneiderman, the attorney general of New York, as part of his investigation into the fun-while-it-lasted mortgage securitization fest. If he were to sign on to the settlement, his investigation into MERS could not move forward.

“Rules matter,” Mr. Biden said in announcing his suit. “A homeowner has the obligation to pay the mortgage on time and lenders must follow the rules if they are seeking to take away someone’s house through foreclosure.”

Abiding by the rules has not been the modus operandi in the foreclosure arena. That’s why any settlement must be tough, truly beneficial to borrowers and monitored for compliance. Otherwise, the deal would be another case where our government let the big banks win while Main Street loses.

A version of this article appeared in print on October 30, 2011, on page BU1 of the New York edition with the headline: A Deal That Wouldn’t Sting.

Good thing the New York AG has decided to try and cut his own deal! And just when you thought you've heard it all!

Friday, October 28, 2011

California Members of Congress call for “justice for homeowners”in settlement with mortgage servicersLawmakers object to “get-out-of-jail free card” for large Wall Street banksWASHINGTON, DC – Citing reports that a settlement with Wall Street’s largest banks could mean only $25 billion in relief to homeowners, U.S. Rep. George Miller (D-Martinez) and more than two dozen of his Democratic colleagues from the California congressional delegation today urged Attorney General Kamala Harris not to give the Wall Street banks a “get-out-of-jail free card” while leaving homeowners out to dry.The lawmakers wrote in support of Harris’ efforts to ensure that a settlement being negotiated between states and large banks over mortgage abuses provides substantial relief to California homeowners. Reports suggest that the settlement under discussion would provide just $20 billion to $25 billion in relief to homeowners, despite the fact that underwater homeowners nationwide owe $700 billion more on their mortgages than their homes are worth.From the letter, “It is clear that thousands of Californians have been hurt by unfair and, in many cases, illegal practices in the foreclosure process. For this reason, we feel that it is critical that any settlement regarding these abuses must be fair to California homeowners. In particular, we believe that a deal must be structured to provide substantial financial relief for these homeowners…“Additionally, we do not feel that it is responsible to grant a broad release of liability for abuses that have not been investigated by the attorneys general and are not remedied in the settlement. Our constituents need to know that our nation’s largest financial institutions have the same mandate to follow the law that they do—in other words, the simple fact of being an enormous Wall Street bank cannot mean getting a get-out-of-jail free card.”Miller said his constituents are fed up. “Wall Street banks have chewed up homeowners all over the country, with no regard for the law or for what’s right. This is not an every once in a while story – it is an everyday story. Every day we hear how banks lose paperwork or charge ridiculous fees or give homeowners wrong information about a modification. This is abuse. Pure and simple. And it has been at every stage of the mortgage process. We need to provide justice to these homeowners.”The lawmakers also asked that Harris conduct “a vigorous and wide-ranging investigation into the mortgage industry’s conduct during the foreclosure crisis” and that she robustly enforce California law against predatory and unscrupulous lenders. Last year, members of Congress from California wrote to U.S. Attorney General Eric Holder asking that he investigate foreclosure abuses against California homeowners.The letter represents the latest of a number of actions taken by California Democrats in Congress to address the foreclosure crisis. Most recently, members wrote to President Obama asking him to take more aggressive action and conducted a series of meetings with Federal Housing Finance Agency Acting Director Ed DeMarco regarding the need to provide more assistance to underwater homeowners.Approximately 30% of all California homeowners with mortgages are currently underwater on their homes, while many more families are struggling to pay their mortgages due to continued high unemployment in the state.The full text of the letter with signatories is below—Dear Attorney General Harris:We are writing to commend your leadership in ensuring that California homeowners get meaningful relief from any settlement with our nation’s largest financial institutions regarding mortgage and foreclosure fraud, and for your work to ensure that a legal settlement does not relieve those institutions of liability for abuses that have not been fully investigated and addressed.As you know very well, California has been hit extremely hard by the housing crisis. One of every 226 housing units in our state received a foreclosure filing in August—a rate over twice the national average. According to CoreLogic, 30 percent of homeowners with mortgages in our state are underwater—again, one of the highest rates in the country. These problems do not just impact homeowners directly—they are devastating for realtors and construction workers who are losing work, for local governments losing property tax receipts, and for all sorts of small businesses who lose customers.At the same time, California has also been home to myriad abuses throughout the mortgage process. Last year, in response to numerous concerns that we all heard from our constituents, we catalogued dozens of cases of abuses in the mortgage modification and foreclosure process. We wrote Attorney General Holder last October urging him to investigate these cases and similar abuses. It is clear that thousands of Californians have been hurt by unfair and, in many cases, illegal practices in the foreclosure process.For this reason, we feel that it is critical that any settlement regarding these abuses must be fair to California homeowners. In particular, we believe that a deal must be structured to provide substantial financial relief for these homeowners. Far too few California homeowners—particularly homeowners who are underwater on their mortgages—have, to date, received the assistance that is necessary, and that must change with this deal. Additionally, we do not feel that it is responsible to grant a broad release of liability for abuses that have not been investigated by the attorneys general and are not remedied in the settlement. Our constituents need to know that our nation’s largest financial institutions have the same mandate to follow the law that they do—in other words, the simple fact of being an enormous Wall Street bank cannot mean getting a get-out-of-jail free card. We also look forward to a vigorous and wide-ranging investigation into the mortgage industry’s conduct during the foreclosure crisis, and to robust enforcement of California law against predatory and unscrupulous lenders. It is very important that we provide not only justice for the homeowners who were the victims of these abuses, but also accountability for those who committed them.Therefore, we thank you for your work to ensure that any settlement is a strong one that is fair to California homeowners and urge you to hold strong to these principles. Thank you for your hard work and for keeping these views in mind.Sincerely,BacaBermanCappsCardozaChuCostaDavisEshooFarrFilnerGaramendiHahnHondaLeeLofgrenMatsuiMcNerneyMiller, GeorgeNapolitanoRoybal-AllardSanchez, LindaSanchez, LorettaSchiffSpeierStarkThompsonWatersWaxmanWoolsey

Thursday, October 27, 2011

New York Attorney General Eric Schneiderman has subpoenaed MERS, an electronic registry of mortgages used by the banking industry, seeking information about how it is used by major banks as part of a joint New York-Delaware mortgage probe.

"I supported Eric Schneiderman in his campaign and I am glad that I did. It wasn’t until I was recently part of the “SAVE YOUR HOME” mortgage foreclosure defense seminar in Sarasota, Florida (sponsored by the Mortgage Justice Group) that I realized how fortunate we are in New York to have elected officials and judges who understand the plight of our homeowners."- Robert E. Brown, Esq.

Oct 27 (Reuters) - New York's attorney general has subpoenaed MERS, an electronic registry of mortgages used by the banking industry, seeking information about how it is used by major banks, a person familiar with the matter said on Thursday.

The subpoena comes amid widespread concern over the maintenance of mortgage documents, and banks' handling of foreclosures and is part of a joint New York-Delaware mortgage probe, the source said.

A Mers spokeswoman, Janis Smith, said there is "no merit" to Delaware's allegations. The company cooperated with the Delaware investigation and provide information it requested through a subpoena earlier this year, Smith said.

She declined to comment on New York.

New York Attorney General Eric Schneiderman is seeking information about how five major mortgage companies are using MERS, also known as Mortgage Electronic Registration Systems, the source said.

One Mississippi survey respondent estimated that 45 percent to 50 percent of transactions were delayed because of mortgage application timelines.

A California agent stated, “Approximately 70% of all distressed property closings (in our area) have been delayed because of loan conditions.”

A new California law is further aggravating the problem by forbidding forced deficiency notes on short sales, according to Campbell and Inside Mortgage Finance.

Under the new law, “seconds are not willing to settle,” stated one California agent, adding, “Mortgage application timelines run out for the buyers waiting to receive acceptance, counter or declination.”

The HousingPulse survey found that the gap between the supply of distressed homes and the absorption by first-time home buyers declined from 11 percent in August to 8.8 percent in September.

The initiative involves a series of rule changes to the Home Affordable Refinance Program (HARP) to allow more underwater homeowners to reduce their mortgage debt by taking advantage of today’s rock-bottom interest rates.

Mortgages backed by Fannie Mae and Freddie Mac, and originally sold to the GSEs on or before May 31, 2009 are eligible for the program.

Under the revised HARP guidelines, the 125 percent loan-to-value (LTV) ceiling has been eliminated. Previously, only borrowers who owed up to 25 percent more than their home was worth could participate in HARP. That limitation has now been removed. The program will continue to be available to borrowers with LTV ratios above 80 percent.

The new program enhancements address several other key aspects of HARP that industry participants say have restricted its impact, including eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers, as well as allowing mortgage insurers to automatically transfer coverage from the original loan to the new loan.

In addition, Fannie Mae and Freddie Mac have done away with the requirement for a new property appraisal where there is a reliable AVM (automated valuation model) estimate already provided by the GSEs, and they’ve agreed to waive certain representations and warranties on loans refinanced through the program.

Not only are loans eligible for HARP considered “seasoned loans,” but a refinance helps borrowers strengthen their household finances, reducing the risk they pose to the GSEs. Thus, FHFA feels reps and warranties are not necessary for some of these loans.

With Monday’s announcement, the end date for HARP has been extended from June 30, 2012 to December 31, 2013.

The GSEs will release program instructions to lenders by the middle of next month, and FHFA expects some lenders will be ready to accept applications by December 1.

Since HARP was rolled out in early 2009, approximately 1 million homeowners have refinanced their mortgage loans through the program. FHFA estimates that with the revised guidelines, another 1 million will be able to take advantage of the program.

To qualify, borrowers must be current on their mortgage payments, but government officials believe by opening HARP up to more homeowners with higher thresholds of negative equity, it will help to prevent foreclosures by erasing the primary motivation behind strategic defaults.

Economists at the University of Chicago Booth School of Business estimate that roughly 35 percent of mortgage defaults are strategic. Numerous industry studies have found that homeowners who owe significantly more than their home is worth are more likely to throw in the towel and walk away from their mortgage debt even if they have the ability to continue making their payments.

“We anticipate that the package of improvements being made to HARP will reduce the Enterprises credit risk, bring greater stability to mortgage markets, and reduce foreclosure risks,” FHFA stated in its announcement Monday.

Fannie Mae and Freddie Mac also released statements in response to the announcement.

Michael J. Williams, Fannie Mae’s president and CEO, called the program a “welcome development.”

“By removing some of the impediments to refinance, lenders can more easily participate in the program allowing more eligible homeowners to take advantage of the low interest rates,” Williams stated.

Without a promissory note, a foreclosing plaintiff cannot show a legal injury, i.e., does not have standing to sue. Without standing, the action before the court does not qualify as a "case or controversy" under Article III of the constitution. Courts can only make rulings on "cases or controversies;" advisory opinions are a legal nullity. Consequently, a court that purports to enter a "judgment" where it has no subject matter jurisdiction has in fact entered a legal nullity on its docket; that "judgment" is void as a matter of law.

As such, any such "judgment" entered where the plaintiff had no standing is open to collateral attack in any subsequent proceeding. What is more, subject matter jurisdiction cannot be waived; were that the case, parties could falsely induce courts to make binding rulings--obviously non-sensical.

The procedural posture of this particular case is unusually serpentine, no doubt. In any event, there is nothing controversial--as a legal proposition--about this case. I'm sure the banks, who are now shitting their pants over the implications of this case, see it differently, but they're just wrong.

In essence, the ruling upheld that those who had purchased foreclosure properties that had been illegally foreclosed upon (which is virtually all foreclosure sales in the last five years), did not in fact have title to those properties. Given the fact that more than two-thirds of all real estate transactions in the last five years have also been foreclosed properties, this creates a small problem.

The Massachusetts SJC is one of the most respected high courts in the country, other supreme courts look to these decisions for guidance, and would find it difficult to rule any other way in their own states. It is a precedent. It's an important precedent.

Here are the key components of the Bevilacqua case:

1. In holding that Bevilacqua could not make "something from nothing" (bring an action or even have standing to bring an action, when he had a title worth nothing) the lower land court applied and upheld long-standing principles of conveyance.

2. A foreclosure conducted by a non-mortgagee (which includes basically all of them over the last five years, including the landmark Ibanez case) is wholly void and passes no title to a subsequent transferee (purchasers of foreclosures will be especially pleased to learn of this)

3. Where (as in Bevilacqua) a non-mortgagee records a post-foreclosure assignment, any subsequent transferee has record notice that the foreclosure is simply void.

4. A wholly void foreclosure deed passes no title even to a supposed "bona fide purchaser"

5. The Grantee of an invalid (wholly void) foreclosure deed does not have record title, nor does any person claiming under a wholly void deed, and the decision of the lower land court properly dismissed Bevilacqua's petition.

6. The land court correctly reasoned that the remedy available to Bevilacqua was not against the wrongly foreclosed homeowner but rather against the wrongly foreclosing bank and/or perhaps the servicer (depending on who actually conducted the foreclosure)

When thinking about the implications of Bevilacqua – the importance of point six cannot be overstated.

The re-foreclosure suggestion is not valid

Re-foreclosing on these properties in not likely as has been suggested by bank layers in light of the Bevilacqua ruling. We aren't talking about Donald Trump here and we have a funny feeling he won't be affected either. Mostly it's guys like Bevilacqua who bought single or multi units, in the "hundreds of thousands" range. It seem unlikely that the majority of these folks would have the capital to eat their existing loses, re-foreclose at great expense, and on top of all of that come out as the highest bidder on the very property they formerly thought was their own. In many cases, as was the case in Bevilacqua, the original purchaser of the foreclosure may have already resold the property and moved on, thus leaving in their wake an even more serious problem; the likelihood of a property owner, who had nothing directly to do with a foreclosure, but is left with all the fallout of a post-Bevilacqua world.

Re-bidding on these properties in a re-foreclosure scenario would be done in what is soon to be a new inflationary environment (most originally bid in a deflationary environment for housing), thus making the "re-foreclosure" blank threat all the more unconvincing and unlikely.

However, it should be easy enough for investors similarly situated to Bevilacqua to simply hire fee contingent attorneys who can sue the banks and servicers for conveying fraudulent deeds – that seems like a much easier and logical proposition. When the potentially millions of lawsuits are added to the complaints filed by investors in MBS, we think the banks will finally be revealed as wholly insolvent. The only other way it could happen faster, is if the average American home owner, realizing he may never obtain clear title to his home (short of an indemnity from his bank), finally stops making his monthly payments on his invalid note (which completely lacks a valid security instrument). In this way, the existing insolvency of banks would be recognized in a matter of days rather than months or years.

The act of denial does not actually alter reality

Ostriches are said to have discovered this the hard way. On November 12th, 2010 in our article "Tattoos, Pyramid Schemes and Social Justice" we advocated that home owners, with securitized mortgages, regardless of their ability to pay, consider suspending their mortgage payments, and place those funds into a private escrow account instead. We wrote:

"Radical though it may seem, we believe the only way to stop the chaos of fraud and the breakdown of the rule of law in our courts, and most importantly to ensure that we ourselves are not participants in the fraud, is for homeowners who can afford their mortgage to stop paying it..."

The article goes on to say:

"For example, what is easier; to scorn those who are being foreclosed on because they can no longer afford their mortgage or to accept the possibility that our entire financial, and maybe justice system might be badly corrupted? Across all spectrums of crime, victims are often blamed, just ask attorneys who represent rape victims. This phenomenon is by no means unique to mortgage fraud, or those who have been raped by the institutions who carry out this trade. It has been made to appear as if those who have fallen on hard times are a matter of "incidental" inequalities in an otherwise procedurally just system. However, it is precisely the opposite which is true. Our financial institutions have created deliberate inequalities, through the use of procedurally unjust systems."

We pointed out that suspending such payment might be done for the following reasons, which in light of the recent Bevilacqua decision, and the pending Eaton Decision, are increasingly being proven correct:

"1. They are not sure where or if their payments are going to the true note holder.

2. They no longer know who the true note holder is.

3. They have a legitimate concern that they may not be able to ever obtain clear title and/or title insurance (in the event of a sale) given what we now know about improperly conveyed titles and the illegitimacy of "MERS".

4. They do not want to be an unwitting or passive participant in fraud.

5. They care about America, want our culture to be healed and recognize the dignity of every human being."

Long before the Ibanez decision was handed down we wrote the following (taken from the same article):

"If these legitimate reasons are the cause to suspend mortgage payments, then what attack on these "non-co-operators" character can be levelled? In these cases, Judge's will have to allow for proper civil procedure to take place in order for the legitimate inquiries of concerned Americans to come to light. Since banks virtually never produce adequate documentation (which appears to be by design), chances are things will escalate."

We went on to discuss the unique risks of apathy and denial in the following:

"...Americans have a duty to ask critical questions about the operations of their financial institutions, and if evidence has been presented that a deal was made, but not everyone was playing by the rules, than those deals need to be looked at again. It is not good enough any longer to say, if it doesn't affect "me" than, I'm not getting involved. We have a duty to one another as Americans, and more importantly as human beings, to care about truth and justice. What's more, apathy, so long as we are not affected, is a short lived consolation. Ultimately, this crisis will affect everyone sooner or later."

Certainly when the SJC handed down their opinion affirming Bevilacqua, perhaps hundreds of thousands, and ultimately millions of people who previously thought they were not affected, were suddenly well, affected. That is because there has been about six million foreclosures since the current economic crisis began, and those foreclosures may have resulted in many more interested parties, as was the case in Bevilacqua, who sold the subject property to four new owners, thus multiplying the number of parties involved, and ultimately the number of legal actions which could be brought. It is not hard to see where six million voided foreclosures might well result in new lawsuits in excess of that number – and if the courts advice is taken, these complaints would be directed, and properly so, at banks and servicers.

In the Ibanez article, which was written in January of this year we wrote the following:

"If you live in Massachusetts and your mortgage has been securitized, or if you have purchased a foreclosure property, we think it would be wise to consider suspending your mortgage payments if you haven't already."

We believe these particular words have become incredibly relevant given the implications of Bevilacqua.

We decided to call a few title insurance companies to get their "take" on it all. We made the mistake of identifying ourselves as "bloggers" in the first phonecall – that call may well have set a new land speed record for the fastest time from answering to hanging up. Thinking there might be a smarter approach, we decided to identify ourselves as homeowners (equally true) on the next call – the results were a little better, but only slightly.

The underwriters and title examiners we spoke to kept asking if we were attorneys, or if we represented the home owner as "council". We thought this was curious because we kept pointing out that we were ourselves just homeowners. Then it hit us, they have never actually spoken to a real, live, breathing customer on the policy origination side, they had only ever spoken to lawyer-brokers. We thought; what an interesting confluence of incentives this must create, and why is the buyer of the policy necessarily so far removed from the seller?

In Menashe v. Baum, the U.S. District Court, Eastern District of New York allowed Plaintiff's individual Fair Debt Collection Practices Act claim to go forward against Defendant Steven J. Baum, Esq. based on Baum's alleged attempt to collect legal fees from a previously dismissed 2008 Foreclosure in a 2010 Foreclosure Action.

*1Plaintiff Jacob Menashe ("Plaintiff") brought this putative class action against Defendant Steven J. Baum, Esq. ("Defendant") under the Fair Debt Collection Practices Act, 15 U.S.C. 1692 et seq. (the "FDCPA") and New York's General Business Law Section 349 ("GBL 349"). Pending before the Court is Defendant's motion to dismiss the Complaint for failure to state a claim. For the following reasons, this motion is GRANTED IN PART.

*2

BACKGROUND

Plaintiff defaulted on his home mortgage in 2008. His lender, LaSalle Bank National Association ("LaSalle"), initiated foreclosure proceedings in Nassau County Supreme Court (the "2008 Foreclosure"). (Compl. ¶17.) That action was dismissed in September 2009 because LaSalle failed to give Plaintiff proper notice prior to accelerating the outstanding debt. (Id. ¶18, Ex. A.) Shortly thereafter, Plaintiff defaulted again, and LaSalle initiated a second foreclosure action on January 5, 2010 (the "2010 Foreclosure"). (Id. ¶19.) A mandatory settlement conference was scheduled pursuant to N.Y. C.P.L.R. 3408 ("CPLR 3408") and the New York Uniform Civil Rules for the Supreme and County Courts 202.12-a ("Uniform Rule 202.12-a"). The conference was held on May 6, 2010, but Plaintiff did not attend. (Def. Opp. 2-3.)

Defendant represented LaSalle in both foreclosure proceedings. (Compl. ¶¶17, 19.) On July 8, 2010, Defendant sent Plaintiff a letter stating the payoff amount necessary to reinstate Plaintiff's mortgage. (Id. ¶22.) Plaintiff's loan and mortgage agreement authorized LaSalle to recover the legal fees it reasonably expended in the event of Plaintiff's Default,1*3 and the payoff letter included an entry for $350 with the description "LEGAL FEES — SETTLEMENT CONFERENCE" (Compl. ¶23). The letter also included entries for $420 for "INDEX NUMBER FEE"; $3,050 for "LEGAL FEES — MOTION PRACTICE"; and $190 for "REQUEST FOR JUDICIAL INTERVENTION FEE." (Id. ¶25.) These items are related to the 2008 Foreclosure that was dismissed. (Id. ¶4.)

Defendant's attempt to recover its fees for the settlement conference is at the heart of this case. To put this dispute in context, the Court first discusses CPLR 3408 and Uniform Rule 202.12-a. CPLR 3408 was enacted in August 2008. In its original form, the provision required courts presiding over foreclosures involving subprime or nontraditional mortgages to hold a settlement conference. (See Brett A. Scher Declaration ("Scher Decl.") Ex. F.) Also in 2008, New York's Chief Administrative Judge enacted Uniform Rule 202.12-a to give effect to CPLR 3408. As with CPLR 3408, the original version of the Uniform Rule required courts to schedule settlement *4 conferences. The Uniform Rule also provided in part that "[t]his section shall be applicable to residential mortgage foreclosure action brought on or after September 1, 2008." Uniform Rule 202.12-a (2008 version).

New York State's Legislature later broadened CPLR 3408 to include actions involving "any residential foreclosure action involving a home loan." N.Y.C.P.L.R. 3408 (McKinney 2011). At the same time, the legislature added what the Court will refer to as the "Attorneys' Fees Provision": "A party to a foreclosure action may not charge, impose, or otherwise require payment from the other party for any cost, including but not limited to attorneys' fees, for appearance at or participation in the settlement conference." Id. In relevant part, the legislative history indicates that the amendments "shall take effect on the sixtieth day" after they are passed and "shall apply to legal actions filed on or after such date." Laws 2009, ch. 507, §25, sub e, eff. Feb 13, 2010; 2009 N.Y. ALS 507; 2009 N.Y. 507; 2009 N.Y.S.N. 7. The amendments were passed on December 15, 2009; thus, they took effect and apply to foreclosure actions commenced on or after February 13, 2010. See 2009 N.Y. A.L.S. 507, 2009 N.Y. LAWS 507, 2009 N.Y. S.N. 7.

Following the amendments to CPLR 3408, the Chief Administrative Judge amended Uniform Rule 202.12-a. Substantively, the changes largely tracked the amendments to *5 CPLR 3408, and the amended Uniform Rule also took effect on February 13, 2010. The amended Uniform Rule also changed its "applicability" section in the following manner (deletions are bracketed, additions are underlined):

(a) Applicability. This section shall be applicable to residential mortgage foreclosure actions [brought on or after September 1, 2008, involving one- to four-family dwellings owned and occupied by the defendant where the underlying loan is highcost, subprime or nontraditional, as defined in section 6-1 of the Banking Law and section 1304.5(c) and (e) of the Real Property Actions and Proceedings Law, and was entered into between January 1, 2003 and September 1, 2008] involving a home loan secured by a mortgage on a one- to four- family dwelling or condominium, in which the defendant is a resident of the property subject to foreclosure.

(Newman Decl. Ex. D.)

DISCUSSION

The thrust of Plaintiff's case is that the amended Uniform Rule 202.12-a prohibiting lenders from recovering attorneys' fees for the mandatory settlement conferences applies retroactively to the 2010 Foreclosure, which was filed on January 5, 2010. (See Compl. ¶29.) Following this logic, Defendant's payoff letter, which included settlement conference legal fees in the payoff total, arguably constituted a FDCPA violation. For the reasons that follow, the Court rejects *6 Plaintiff's strained attempt to apply the amended Uniform Rule 202.12-a to his 2010 Foreclosure. His individual claim that Defendant violated the FDCPA by attempting to collect legal fees related to the 2008 Foreclosure may go forward.

To survive a Rule 12(b)(6) motion, a plaintiff must plead sufficient factual allegations in the complaint to "state a claim [for] relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1974, 167 L. Ed. 2d 929, 949 (2007). The complaint does not need "detailed factual allegations," but it demands "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555. In addition, the facts pleaded in the complaint "must be enough to raise a right to relief above the speculative level." Id. Determining whether a plaintiff has met his burden is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009). On a motion to dismiss, a plaintiff gets the benefit of all reasonable inferences, see, e.g., Litwin v. Blackstone Group, L.P., 634 F.3d 706, 711 n.5 (2d Cir. 2011), but "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, __ U.S. __, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009).

*7

I. The Amended Uniform Rule does not Apply Retroactively

Plaintiff alleges that Defendant violated the FDCPA by (1) attempting to collect amounts not permitted by law (15 U.S.C. §1692f(1)); (2) using unfair and unconscionable collection methods (15 U.S.C. §1692f); (3) giving false impression of the character, amount or legal status of the alleged debt (15 U.S.C. §1692e(2)); (4) using false or deceptive collection methods (15 U.S.C. §1692e(5)); and (5) making threats to take action which cannot legally be taken. (Compl. ¶29.) Plaintiff's case rests on the theory that, notwithstanding the New York State Legislature's clear edict that CPLR 3408's "Attorneys' Fee Provision" amendment applies only to foreclosures commenced on or after February 13, 2010, the amended Uniform Rule applies retroactively and covers his January 5, 2010 foreclosure action. In Plaintiff's view, the amended Uniform Rule, which does not specify an effective date, renders the legal fee included in the payoff letter an amount prohibited by law.

Plaintiff concedes, as he must, that the amended CPLR 3408 only applies to foreclosures brought on or after February 13, 2010 (see Def. Opp. 9), but he argues that the Chief Administrative Judge made the proscription on settlement conference legal fees retroactive when she amended the Uniform Rule after the legislature amended CPLR 3408. Plaintiff's two *8 main arguments are first, that by deleting the "brought on or after" language from the original Uniform Rule, the Chief Administrative Judge "obviously intended" the amended Uniform Rule to apply retroactively (Def. Opp. 9) and second, that the amended Uniform Rule is a type of remedial or procedural rule that is normally given retroactive effect (id.). The Court rejects both arguments. Statutes are generally presumed to apply prospectively, see, e.g., Majewski v. Broadalbin-Perth Cent. Sch. Dist., 91 N.Y.2d 577, 584, 696 N.E.2d 978, 673 N.Y.S.2d 966 (1998), and if the Chief Administrative Judge wanted to make the amended Uniform Rule retroactive in spite of the Legislature's clear contrary intent, she would have said so explicitly. This is particularly true where, as here, the Legislature postponed the effective date of amended CPLR 3408. See O'Connor v. Long Island R.R., 406 N.Y.S.2d 502, 503 (2d Dep't 1978) (explaining that the presumption against retroactivity is strongest where Legislature has postponed the effective date). More to the point, though, is that the Chief Administrative Judge lacked the authority to make the Attorneys' Fees Provision retroactive. "The sources of judicial rule making authority…do not afford carte blanche to courts in promulgating regulations and no court rule can enlarge or abridge rights conferred by statute." LaSalle Bank, NA v. Pace, 31 Misc. 3d 627, 633-34, 919 N.Y.S.2d 794, 801 (N.Y. Sup. Ct. *9 2011). In sum, there is no indication that the Chief Administrative Judge's silence as to the amended Uniform Rule's effective date was an attempt to override the Legislature's clear intent that the "Attorneys' Fee Provision" applies only to foreclosures filed on or before February 13, 2010.

For a related reason, the Court reject's Plaintiff's argument that the amended Uniform Rule should be given retroactive effect because it is remedial or procedural. Even if the amended Uniform Rule were a remedial or procedural provision, the Chief Administrative Judge lacked the authority to override the Legislature's clear intent and any contrary, judge-created rule would be invalid. See LaSalle, 919 N.Y.S.2d at 801 ("Since rule making authority cannot significantly affect the legal relationship between litigating parties, the imposition of additional matters that impair statutory remedies or enlarge or abridge rights conferred by statute are not the proper subjects of rules promulgated by court administrators.").

Accordingly, Plaintiff's FDCPA claim arising out of Defendant's attempt to collect legal fees for the settlement conference is dismissed. Similarly, Plaintiff's GBL 349 claim, which is premised on his argument that amended Uniform Rule 202.12-a applies retroactively, must also be dismissed, a point Plaintiff concedes. (Pl. Opp. 11.)

*10

II. Plaintiff's Remaining FDCPA Claim

Plaintiff also alleges that Defendant violated the FDCPA by including legal fees from the 2008 Foreclosure in the 2010 payoff letter. To state an FDCPA claim, Plaintiff must allege that "(1) [he] has been the object of collection activity arising from consumer debt, (2) the defendant is a debt collector as defined by the FDCPA, and (3) the defendant has engaged in an act or omission prohibited by the FDCPA." Ogbon v. Beneficial Credit Servs., Inc., 2011 WL 347222, at *4 (S.D.N.Y. Feb. 1, 2011) (quoting Carrington v. Chrysler Fin., No. 10-CV-1024, 2010 WL 1371664 (E.D.N.Y. Apr. 5, 2010)). The FDCP prohibits "false, deceptive, or misleading representation or means in connection with the collection of any debt" including, without limitation, the "false representation of…the character, amount, or legal status of any debt." 15 U.S.C. §1692e(2)(A). Here, Plaintiff claims that Defendant (1) is a debt collector within the meaning of the FDCPA (Compl. ¶7), (2) sent a payoff letter as an attempt to collect Plaintiff's mortgage debt (see id. ¶¶15, 22-25), and (3) falsely represented that Plaintiff owed certain legal fees in connection with the 2008 Foreclosure proceeding, which was dismissed in Plaintiff's favor after the lender could not establish Plaintiff's default (id.). These allegations are sufficient to state an FDCPA claim.

*11

CONCLUSION

For the foregoing reasons, Defendant's motion to dismiss is GRANTED IN PART AND DENIED IN PART. Specifically, Plaintiff's FDCPA and GBL 349 claims arising out of Defendant's attempt to collect legal fees for the mandatory settlement conference, including his class action allegations, are DISMISSED with prejudice. Plaintiff's individual FDCPA claim based on Defendant's alleged attempt to collect legal fees from the 2008 Foreclosure may go forward.

SO ORDERED.

1. Section 7(E) of the Adjustable Rate Note provides that, upon the borrower's default, the lender "will have the right to be paid back by [the borrower] for all of [the lender's] costs and expenses in enforcing th[e] Note to the extent not prohibited by applicable law. Those expenses include, for example, reasonable attorneys' fees." (Def. Ex. C.) Also, the Consolidated Mortgage includes two sections addressing the collection of fees in the instance of a default: Section 14 provides that the "Lender may charge [the borrower] fees for services performed in connection with [a] default…including, but not limited to, attorneys' fees," and Section 22 states that "[i]n any lawsuit for Foreclosure and Sale, Lender will have the right to collect all costs and disbursements and additional allowances allowed by Applicable Law, and will have the right to add all reasonable attorneys' fees to the amount [borrower] owe[s] to Lender." Id.

Bank of America reported Tuesday that it saw a profit of $6.2 billion, or 56 cents per share, during the third quarter of 2011. That compares to a loss of $7.3 billion, or 77 cents per share, in the year-ago period.

The third-quarter numbers= were impacted by what the back described as “significant items,” including a $4.5 billion pretax gain resulting from an accounting adjustment related to structured liabilities, similar to what was seen in Citi’s and JPMorgan’s latest earnings releases. The year-ago quarter included a $10.4 billion goodwill impairment charge.

Perhaps the biggest headline-grabber gleaned from BofA’s third-quarter numbers is the fact that the company lost its position as the largest U.S. bank by assets. BofA’s balance sheet shows $2.22 trillion in assets as of the end of September. That puts it in the No. 2 spot behind JPMorgan Chase, which reported $2.29 trillion in assets at the end of the third quarter.

On the mortgage side of the business, BofA funded $33 billion in residential first mortgages during the third quarter to over 151,000 homeowners. Approximately 47 percent of this money was for home purchases and 53 percent were refinances.

The company’s provision for credit losses declined 37 percent from the year-ago quarter. BofA says the reduction reflects “improved credit quality across most consumer and commercial portfolios and underwriting changes implemented over the last several years.”

During the third quarter of this year, Bank of America completed more than 52,000 loan modifications. That’s down from 69,000 in the second quarter of 2011, but up from 50,000 in the third quarter of 2010.

The company says it successfully implemented the rollout of a single point of contact (SPOC) for mortgage default servicing over the July-to-September period. More than 6,500 BofA employees have now been trained and deployed for SPOC positions.

The bank continues to grapple with legacy mortgage issues as they relate to repurchase claims by investors.

During the second-quarter of this year, the company put aside $14 billion to cover expected buyback demands — $8.6 billion for the private-label settlement proposed to trustee Bank of New York Mellon and another $5.4 billion in the event that other claims arose from the settlement. The BNY Mellon proposal has faced heavy opposition from some of the private investors involved and has yet to be approved.

At the same time, Bank of America told investors Tuesday that loan buybacks from Fannie Mae and Freddie Mac have become “increasingly inconsistent” with what the bank feels it is contractually obligated to cover. Outstanding claims from the two GSE’s currently stand at over $5 billion.

How about sharing some of those profits by giving homeowners reasonable loan modifications?

A class action lawsuit has been filed in Ohio against MERSCORP, Inc., Mortgage Electronic Registration System, Inc. and MERS’s members which alleges violations of Ohio state law arising from MERS’ failure to record intermediate mortgage assignments in, and pay the county recording fees to, Ohio county recording offices. The suit alleges that in failing to record, Defendants systematically broke chains of title throughout Ohio counties’ public land records by creating “gaps” due to missing mortgage assignments they failed to record, or by recording patently false and/or misleading mortgage assignments. Defendants’ purposeful failure to record has eviscerated the accuracy of Ohio counties’ public land records, rendering them unreliable and unverifiable — damage to public land records that may never be entirely remedied.

In my opinion, if banks were forced to pay the county recording taxes on all of the mortgages that were transferred through MERS, we would close our budget deficit in no time.

Bernstein Liebhard LLP Announces Filing of a Class Action against MERS and Its Members

NEW YORK, Oct 13, 2011 (BUSINESS WIRE) — Bernstein Liebhard LLP, with David P. Joyce, Prosecuting Attorney for Geauga County, Ohio, announced today that a lawsuit has been filed in the Geauga County Court of Common Pleas by Plaintiff Geauga County, on behalf of itself and all other Ohio counties, (the “Class”) against MERSCORP, Inc., Mortgage Electronic Registration System, Inc. (“MERS”), and MERS’s members (collectively, “Defendants”).

In the class action complaint, Plaintiff Geauga County, on behalf of itself and all other Ohio counties, alleges violations of Ohio state law arising from Defendants’ failure to record intermediate mortgage assignments in, and pay the attendant county recording fees to, Ohio county recording offices. In failing to record, Defendants systematically broke chains of title throughout Ohio counties’ public land records by creating “gaps” due to missing mortgage assignments they failed to record, or by recording patently false and/or misleading mortgage assignments. Defendants’ purposeful failure to record has eviscerated the accuracy of Ohio counties’ public land records, rendering them unreliable and unverifiable — damage to public land records that may never be entirely remedied.

As a result, the Class seeks declaratory and injunctive relief, as well as damages, to remedy Defendants’ persistent, and purposeful, failure to comply with Ohio’s legal requirement to record mortgage assignments in the proper county recording office. In doing so, Defendants avoided paying the attendant county recording fees as required by Ohio state law. Ohio’s recording laws have been in place for nearly 200 years.

Bernstein Liebhard LLP has pursued hundreds of complex litigations and has recovered almost $3 billion for its clients. It has been named to The National Law Journal’s “Plaintiffs’ Hot List” in each of the last nine years.

Below is a story of an attorney that has been battling the banks on behalf of many Northern Nevada homeowners for several years. His first experience with the banksters’ egregious conduct towards borrowers began in September 2004 and resulted in a $725K judgment against Wells Fargo Bank. The judgment was entered in April 2009 and is currently being appealed for the second time.

After almost 3 years of litigation, an internal electronic office memorandum dated on or about May 2005 contained an admission from Wells Fargo that it had mistakenly applied the mortgage payment to the wrong account and that it should correct its error. However, Wells Fargo refused to correct its admitted error and has began a campaign trying to wear down and outlast his client. A campaign that began in September 2004 when it first misapplied his client’s mortgage payment (”$2200″). The action was filed in the federal district Court of Northern Nevada in May 2005 and was finally agreed to submit the matter to binding arbitration in January 2009.

An arbitration award was issued in February 2009 and I moved for an award of attorney’s fees and costs in the amount of about $500,000. In Wells Fargo’s opposition to the fee application, it admitted that “plaintiff’s fees and costs pale in comparison to the fees it paid.” Regardless the arbitrator award all of my client’s fees and costs. Wells Fargo then moved to have the arb award vacated pursuant to the Federal Arbitration Act in the district court. The district court refused to rule on its motion because the parties’ stipulation to proceed to binding arbitration was with the understanding that the losing party would appeal the award directly to the 9th Circuit.

In August 2009, Wells Fargo appealed the arbitration award. In February, 2011, the 9th Circuit remanded the motion back to the district court with instructions to rule on the motion. On August 17, 2011, the district court issued its memorandum of decision and order denying Wells Fargo’s motion. And, despite the standard for vacating an arbitration award being next to impossible to meet, Wells Fargo filed another appeal to the 9th Circuit on or about September 10, 2011.

The following is a summary of the attached award and findings of fact by the arbitrator, retired California Appellate Court Justice Michael Nott.

This dispute arose out of Wells Fargo inadvertently applying Johnson’s $2,212.00 September 2004 mortgage payment to the wrong mortgage account. Despite Wells Fargo having discovered and admitting its mistake on or about May 2005, Wells Fargo refuses to this very day, October 11, 2011 (over 7 years later), to remedy its admitted wrong doing and continues to employ 2 expensive law firms to employ expensive delaying tactics to postpone the inevitable payment of the arbitration award.

Retired California Appellate Court Justice Michael Nott after 3 1/2 days of trial and reviewing all the evidence and testimony presented by the Parties concluded that despite Wells Fargo having eventually admitted that it had been wrong all along, Wells Fargo refused to correct its error. In an overview of all the evidence presented, he concluded that this matter should have never taken so long to resolve. It just wasn’t complicated and, more poignantly, the evidence is overwhelming that Johnson provided sufficient documentary proof to back his assertion from Day 1 that all appropriate payments had been made to Loans 55 and 56. Id. In his final analysis, Justice Nott concluded that there wasn’t any reason to rush to reporting any negative comments to the CRAs (after the first report) until the problem was finally resolved. Justice Nott noted that Wells Fargo was servicing 8 of Johnson’s other mortgage loans and did not have to report any of them delinquent.

Justice Nott’s ultimate conclusion was that on the face of the documents presented at trial by Johnson, the investigation by Wells Fargo was inadequate, unreasonable, and untimely under the rules of the FCRA. Further, the yoyo reporting and clearing of late payments from October through May, and the continued foreclosure proceedings on Loan 56 were unnecessary and improper.

Johnson was awarded $260,910 including the attorney’s fees and costs he incurred from September 2004 through the end of the arbitration on or about February 2009. Almost 4 1/2 years of litigation that included, but not limited to, trips to California, North Carolina, and Iowa. Attorney fees awarded were $427,739, and cost in the amount of $37,069.

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